XP Power (LON: XPP) is raising up to £1.5m from a retail offer via Primary Bid at 1150p/share on top of a £43.9m placing. The offer closes at 9pm tonight. The share price slipped 4.43% to 1036p today.
This fundraising comes after the power products supplier had warned during October that weaker demand for products and economic uncertainty in China has reduced demand. The tougher trading led to the cancellation of the proposed dividend and talks with funders.
Management has been trying to reduce costs to offset the lower revenues and capital spending cut back. Surplus stocks will be unwound and the cost reductions could save up to £10m in 2024. There will be no dividends until the end of 2024.
Net debt had been expected to fall this year, but it had risen to £163m by the end of September. There have been revisions to the banking covenants to provide additional headroom. Even after the cash call, which with the other plans for the business could halve the net debt by the end of 2024, the gearing will be at the upper end of the company’s target range.
XP Power is expected to report a 2023 pre-tax profit of £28.4m. Analysts had previously been expecting a flat 2023 pre-tax profit of around £38m.
The new shares will be around one-sixth of the enlarged share capital. The share price has more than halved since the initial profit warning. There were tentative bid approaches, but management think they undervalued XP Power and are raising the extra cash instead.